Earlier this week I wrote a post called: The pull from services to products. And in it I made mention of the fact that part of what’s driving this pull towards products is that the marginal cost of servicing additional users or customers is almost nothing in a world of internet services and products.

Well the reality is that this phenomenon is driving a hell of a lot more. It could – and probably will – fundamentally change almost all aspects of the economy.

I know that sounds like a pretty audacious statement, but if you watch the following 10 minute talk by Albert Wenger (Union Square Ventures) you might start to feel the same way. He outlines 5 changes being driven by the fact that in the digital world, marginal cost = 0. The impacts go well beyond tech, capturing sectors such as transportation and industrial real estate.

[youtube https://www.youtube.com/watch?v=sVEtTzlqsoE?rel=0]

If you can’t see the video, click here.

Earlier this week, I was having a conversation with a number of smart real estate people about the future of retail in today’s internet and smartphone world. This, of course, isn’t a new topic. The industry has been discussing it for years. And while internet retailing still accounts for a relatively small percentage of overall retail sales (~10%), we all know that change is coming.

One company that came up during our discussion was not surprisingly Amazon.com. But the initial comment was that they don’t make any money. Fortunately for me I had just gone through a presentation by venture capitalist Benedict Evans the night before called: Mobile is eating the world. And so I pulled out my phone and presented this slide:

The fact that Amazon operates with basically no net income is on purpose. Look at their revenue growth! So I wouldn’t dismiss them as being a fad. They may only account for 1% of all US retail sales today, but I’d put money on that percentage growing.

The other reason I bring up Amazon is because, in some ways, I think of them as the online equivalent of a big box store. Just like a Walmart or Costco, where you can buy everything from tires to groceries to prescription drugs, I buy a lot of different things, besides just books, off of Amazon.com. You might do the same as well. And this is where I see the immediate threat to offline retailing and retail real estate: big box stores.

In the second half of the 20th century, big box stores were incredibly disruptive to the retail landscape (and to cities). They used cheap land on the outskirts of cities, cheap buildings, and economies of scale to offer rock bottom prices to consumers. The value proposition was about cheap, not about differentiation. But as cheap as they may be, the internet can still do it cheaper.

And retailers know this, which is why I think they all now sell groceries. Groceries have a very low online penetration. Basically everybody still buys groceries in-person. So if you offer that, you have a reason to draw people inside your store, where they will hopefully buy all the other stuff that they need. But as the online value proposition continues to get stronger, I think we’ll see many other, more significant, changes.

Image: Flickr

There’s a lot of buzz around the idea of a “smart city.” IBM is involved. Cisco is involved. And so are many others. But what exactly is a smart city? 

In the Electric City talk below, Adam Greenfield provides his definition, while at the same time being critical of the ones we currently use today, such as this one: It’s the missing link – the connective tissue – between the real estate and technology sectors. (Personally, I find this definition really interesting.)

He also goes on to argue that the way we’re largely thinking about smart cities today is incorrect. We’re far too centralized and administrative in our thinking. Instead, we should be focused on leveraging the crowds of people in our cities that are now virtually all networked.

He then goes on to list 5 technological preconditions to any smart city:

1. Broadband connectivity

2. Low-cost smartphones or personal devices

3. Commitment to open municipal data

4. Cheap public interfaces

5. Cloud computing infrastructure

If you’re interested in this topic, I suggest you watch his talk. It’s only about 10 minutes long. Click here if you can’t see it below.

[youtube https://www.youtube.com/watch?v=9keDwTBmZ3o?rel=0]

Update: This post was revised to reflect the fact that Adam Greenfield is “sharply critical” of the real estate + technology definition of a smart city.